TransUnion Forecasts That Credit Card Delinquencies Will Remain Low

Saturday, December 17th, 2011

The recent release of TransUnion’s annual forecast revealed two big bits of news: both credit card delinquency rates and mortgage delinquency rates are expected to remain low throughout 2012. Credit card delinquencies sunk to a 17-year low during the second quarter of this year.

According to predictions made by TransUnion, the third-largest credit bureau in the country, 2012 should see continued lows in terms of consumer credit card delinquency rates as well as a continued decline in mortgage loan delinquency rates.

Currently the percentage of borrowers 60 days or more past due on making their mortgage payments is 5.9%, but TransUnion expects that figure to drop to 5% by the end of 2012. Historically, mortgage delinquency rates are between 1.5 and 2%, but as a result of the recent recession they crept as high as 6.9% in the latter part of 2009. Since then, they have been declining slowly yet steadily but are still much higher than normal. It will take some time before the rates recede to their historical norm.

Reasons for the falling delinquency rates are, in part, because additional foreclosures have impacted the market, thus causing a reduction in the amount of outstanding delinquencies. Additionally, banks have focused their efforts on availing mortgages only to those borrowers with high credit ratings who are far less likely to default on their payments. The continuing stabilization of the housing market has had a positive effect upon the national mortgage delinquency rate, as well.

Credit card delinquency rates are at historic lows and should remain so in to the New Year. The amount of cardholders late on their payments by 90 days or more sits at 0.6%, a 17-year low.

“The card business is not very risky right now, and we don’t expect it to get very risky any time soon,” said TransUnion group vice president Steven Chaouki, according to Market Watch.

Data gathered by TransUnion revealed the average credit card balance to be $4,762, approximately $1000 less that it was in 2009. This is as a result of a combination of factors: consumers taking it upon themselves to reduce the amount they borrow via credit cards, bank charge offs and tougher lending standards. It is expected that in 2012, Wyoming, Alaska and North Dakota will be the three states in the nation with the lowest amount of credit card debt.

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